Discussant's response to the case for the structured audit approach;

Page 1

Discussant's Response to
The Case for the Structured Audit Approach
Gary L. Holstrum
University of Southern California
My comments on this paper relate to two overriding factors. The first is my basic agreement with the argument for a structured audit approach, and the second is my disagreement with the polar extreme used by Mullarkey to describe what he calls the "predesigned" audit approach. With respect to the first factor, many of the participants in this symposium are already aware of my advocacy of a structured audit approach. During the past few years, I have argued in support of such a structured approach—with a related overall conceptual framework and integrated decision aids—in various articles, confer­ence
papers, and seminar presentations. It seems appropriate and fair for me to disclose my prior orientation and biases regarding this topic. When I originally read this paper, I dutifully attempted to be very critical and immediately made numerous critical comments. However, after reading the Sullivan paper, which is presented at this symposium as a case against a structured audit approach, I realized that any criticisms I had of the Mullarkey paper were relatively editorial.
Polar Extremes
With respect to the second factor, I take issue with the polar extreme used to describe the predesigned approach in Mullarkey's presentation of his trichotomy of audit approaches (unique, structured, and predesigned). Specifi­cally,
I question whether any firm that is actively engaged in audit practice could appropriately be placed in the "predesigned approach" category. According to the author, an important characteristic of a "predesigned" approach is its failure to evaluate the audit risks of specific clients and to adapt the audit approach in response to such specific client risk. In describing the predesigned approach, Mullarkey states: "The specific amount of audit activities subject to some tailoring is designated without specific consideration of risk in this engagement." I am unaware of any firm that engages in audit practice that has a policy of not giving consideration to audit risk in the specific engagement. Furthermore, the only comparative study of audit approaches of firms conducted to date (Cushing and Loebbecke)1 did not find any firms that could appropriately be placed in the "predesigned" approach category upon the basis of this criterion.
Comparison with the Cushing and Loebbecke Study
Cushing and Loebbecke conducted a comparative analysis of the auditing methodologies of all of the "Big 8" firms plus four other large national
85